Goldman sued over executive compensation

Goldman Sachs Group Inc. disclosed Monday that it was named as a defendant in a purported shareholder derivative action challenging the way the firm accounts for employee options.

The complaint claims that the company's proxy statement undervalues stock option awards, that the recipients received excessive awards because the proper methodology wasn't followed, and that the firm's senior management received excessive compensation, constituting corporate waste, according to a Securities and Exchange Commission filing.

The lawsuit seeks, among other things, an injunction against the March 27 annual shareholders meeting, the voiding of any election of directors in the absence of an injunction and an equitable accounting for the allegedly excessive compensation.

The suit was filed in the U.S. District Court for the Eastern District of New York and names Goldman's board, executive officers and members of its management committee as defendants.

In an unrelated action, Goldman's board recommended voting against a shareholder proposal regarding stock options, according to Monday's filing.

Evelyn Davis, a corporate gadfly and record owner of 200 Goldman common shares, is proposing that ''no future new stock options are awarded to anyone nor that any current stock options are repriced or renewed.''

Ms. Davis said that stock option awards have gone out of hand in recent years, and some analysts might inflate earnings estimates, because earnings affect stock prices and stock options.

Ms. Davis also believes that there are other ways to ''reward'' executives and other employees, including giving them actual shares of stock instead of options.

In recommending a vote against this proposal, the company's board said the proposal is ''unduly restrictive and potentially harmful to Goldman Sachs.''

According to the filing, the board believes that Goldman's existing compensation program is appropriately structured, and that it should continue to have the ability to grant stock options to employees and directors, as one form of compensation.

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